Banks Were Pressured to Take TARP Funds: CEO

Banks were pressured to take government bailout funds under the Troubled Asset Relief Program whether they wanted to or not, said Bill Cooper, the chairman and CEO of TCF Financial.

Regional Banks Flourishing in Midwest

Regional banks may be floundering in some parts of the country, but they're flourishing in the Midwest. William Cooper, chairman and CEO of TCF Financial, tells CNBC what his bank is doing right.

"I wouldn't like to use the word 'threat,' but what they said was that they were going to give this money only to the strong banks," he said. "And if you didn't take the money, you'd be recognized as a weak bank."

Although TCF Financial didn't need the money, Cooper said, the regulatory agencies strongly encouraged the bank to take TARP funds. TCF decided to return the funds early. (Click on the video for the full interview.)

"The public anger at this is amazing," he said. "When I have breakfast in the morning, people walk up to me and shake my hand for paying that money off. They really are angry about this whole process."

The current system takes out capital from healthy banks to bail out unhealthy institutions, he said.

"TCF over the years have probably paid $1 billion in FDIC premiums and never have collected a nickel," he said. "You end up with the innocent and honest paying for the misdeeds of others."

Cooper said the federal stimulus has not had a significant effect on Minnesota, where TCF is based, because not much of the money has been spent. In fact, federal action has made things worse, not better, he said.

"I really worry about this spending binge they've gone on," he said. "It may help things in the short-term, but just like some of the things we've done in the past when the Fed ballooned the money supply and so forth, it's likely that we'll pay the piper down years from now."

As a whole, asset values have come down, which has made the environment more difficult for everyone in the banking business, he said.